Pakistan has once again turned to its all-weather friend China for help to avoid defaulting on international debt obligations. According to the Pakistani Ministry of Finance and the State Bank of Pakistan, Pakistan has taken a loan of $1 billion from China to repay a $1 billion loan taken from Saudi Arabia.
The benefit of this arrangement will be that the additional $1.5 billion Chinese loan will not reflect on the book of the federal government and it will not be treated as part of Pakistan’s external public debt. Pakistan is in a serious debt crisis. Earlier in November, it was reported that Pakistan has decided to seek $2.7 billion loan from China for the construction of package-I of the Mainline-1 project of China Pakistan Economic Corridor.
China has become Pakistan’s largest creditor for the past few years. The trade facility, originally meant to promote bilateral trade in respective local currencies, has been used for paying foreign debt.